Education: Investment or hobby?

For you, is college an investment or a hobby? “Well, golly, Jayme. That’s kind of harsh. I mean, I know I don’t make the world’s highest grades, but I take college seriously; it’s not just a hobby for me!” That’s not what I mean. I’m sure you do take college seriously (or will if you’re still pre-college). What I’m talking about is: Is college an investment or a hobby?

If college is something that you’re doing to learn a skill or to help get a job, then it’s an investment. It’s just an investment in your career. But if college is just something you’re doing because you want to learn something, then it’s more like a hobby. Even if you’re going full-time.

Both are great! I love seeing people go to college and study business. Or computers. Or plumbing. Or culinary arts. Or Biblical studies. I also love to see people take just a random class in writing. Or electrical work. Or botany. In whatever they want to learn. Education is always great.

But education (in the formal sense of going to college) isn’t always worth the cost. That’s when it becomes important to determine if your college is an investment or a hobby. Why? Because that will determine if you should take out a loan to pay for the education.

It doesn’t make sense to take out a student loan for a class in ceramics or knitting. You’re not going to be able to turn that debt into a (significant) income. But it might make sense to take out some debt to pay for dental school. That debt will translate into an income.

The questions to ask are: Will this education I’m taking translate into an income? If so, how much? And how much am I willing to pay for that opportunity to make that much money?

Examples

Scenario 1: Alice wants to go to college to be a teacher. The college she picks costs $4,000/year. She’ll earn $30,000/year when she graduates. She needs to finance all of the college and graduates in 4 years.
Cost: $16,000
Income: $30,000

Scenario 2: Brenda wants to go to college to be a nurse. The college she picks costs $40,000/year. She’ll earn $40,000/year when she graduates. She needs to finance all of the college and graduates in 4 years.
Cost: $160,000
Income: $40,000

Scenario 3: Candice wants to go to college to be a plumber. The college she picks costs $3,000/year and is just a 2-year program. She’ll earn $50,000/year when she graduates. She needs to finance all of the college and graduates in 2 years.
Cost: $6,000
Income: $50,000

Scenario 4: Deborah wants to go to college. She just likes to take classes and learn stuff. She takes classes in Bible. In English. In History. In French. She isn’t in a degree program per se; she just takes classes. She takes about $5,000 worth of classes each year. She doesn’t have a job and doesn’t plan on getting one. She doesn’t have money, but her father is offering to pay and he’ll pay in cash.
Cost: $5,000/year
Income: None

For some of these women, education is a hobby. For others, the education is the path to a career. For some of them, the investment has a good pay out. For others, it doesn’t.

My question: are these women acting wisely?*Alice – At 16K in debt, she’ll have monthly payments of about $114 for 15 years. Her income (after taxes and tithes) will be about $1700. She should be able to pay those student loans back faster than 15 years, especially if her income grows.

Brenda – She’s just in trouble. Yes, she makes a little more than Alice ($10,000/year), but her payments will be $1200/month on her $2300 take home pay. That’s half of her income for 15 years will go to student loans! 50%!!!!!

Candice – She’s in the best boat. Her loan payments will be $50 for less than 10 years. Her income will be $2900/month. Easily doable and she’ll be able to pay those loans off super fast!

Deborah – No debt here, so I have no objections at all. For her, education is a hobby. Maybe it will translate into an income someday. Maybe it won’t. Either way, the education isn’t lost. I can think of worst hobbies to have!

Word of caution

Many people say that there is bad debt and good debt. Bad debt being for things like medical payments or cars. Good debt is debt for things like education or houses. I say: debt is debt and while some debt is more understandable than some, all debt impacts your life. Without exception.

This is especially true if it’s your hope to some day not have a job – maybe as a stay-at-home wife or mother or even just volunteer for a ministry. Any debt you take out hurts your chances of doing that. You shouldn’t expect to be a stay-at-home mom some day and ask your future husband to pay $1200/month on your student loans! I have a series coming up in September on being a stay-at-home mom and how to get there and this is one of the biggest things you can do.

So, for you, is education an investment or a hobby?

*All figures are based upon bankrate.com numbers pulled on August 2 and are just an example.